Azerbaijani-Turkish Gas Deal Opens Southern Corridor

Azerbaijani President Ilham Aliyev (left) and Turkish Prime Minister Recep Tayyip Erdogan sign a protocol of the first meeting of Azerbaijan-Turkey High-Level Strategic Cooperation Council in Izmir on October 25.

Turkey and Azerbaijan have signed a long-awaited agreement on Caspian natural-gas supplies and transit to Europe, providing a boost to the EU's efforts to diversify energy supplies and setting up a bidding war for three key pipeline projects.

The agreement, signed in the Turkish city of Izmir on October 25, opens the door to shipments of Azerbaijani, and possibly Turkmen, gas to European customers.

Under the deal, Turkey is to buy gas from Azerbaijan's Shah Deniz-2 field and transport the gas through its territory to Europe. The lack of an agreement on transiting supplies across Turkey has long been the major obstacle to the EU's Southern Corridor energy project, which aims to develop routes that bypass Russian or Iranian territory .

Now all that remains is for Azerbaijan to select from three proposed pipelines -- the Interconnector Turkey-Greece-Italy (ITGI) pipeline; the Trans Adriatic Pipeline (TAP); and the EU's flagship project, the Nabucco pipeline. Earlier this month, Azerbaijani President Ilham Aliyev said that the bid "most acceptable for both Azerbaijan and our partners" would be the winner.

Representatives of the three projects made their cases at a separate meeting on October 25 in Istanbul.

Lobbying Hard

"It's clear that Nabucco aims to transport gas from the Shah Deniz[-2] gas field and from other Azeri sources and that's why we have to align our efforts, of course, with the gas fields on the Azeri side. And we're working on that," Christian Dolezal, head of public affairs at Nabucco, told RFE/RL.

Nabucco has been lobbying hard for Caspian gas contracts and shareholders have been working individually to convince Azerbaijan and Turkmenistan to agree to supply the project. The reason for the EU's strong support for Nabucco may be simply that the project offers to carry more gas to the heart of Europe than the ITGI or TAP. Nabucco also promises to bring the gas to the heart of Europe -- Baumgarten, Austria.

Construction of the Nabucco pipeline

But Shah Deniz-2 will not provide enough gas to fill Nabucco when and if that pipeline starts full operation

"Shah Deniz has a certain volume, that's true. But we also see there are additional volumes, first of all, available in Azerbaijan," Dolezal says. "And, in turn, this would be enough for a first step for Nabucco. We also see then, of course, the potential that Turkmenistan has, and there are talks ongoing for a trans-Caspian pipeline."

Turkmenistan is believed to have the world's third-largest gas reserves but has been reluctant to sign any contracts for gas deliveries to Europe. This is because, despite all of the European pipeline plans, the fact remains that no sections of pipe have been laid. Furthermore, signing a deal with the EU could anger Russia, still the largest purchaser of Turkmen gas, albeit in greatly reduced volumes compared to just a few years ago.

Public Statement

Turkmenistan's position appears to be changing, however, according to Robert Cutler, senior research fellow at the Institute of European, Russian, and Eurasian Studies at Carlton University in Ottawa, Canada.

Cutler notes an interesting comment made by Turkmen President Gurbanguly Berdymukhammedov during a visit by Austrian President Heinz Fischer earlier this month.

"Berdymukhammedov said what he had not said in public before, which was that Turkmenistan would supply gas to Europe," Cutler says. "He had never actually been quoted in the Turkmenistan press saying exactly those words. Also, in the last week it was reported that he approved the composition of a state committee that will elaborate the terms and the logistics and implementation for the provision of gas to foreign customers."

Turkmen President Gurbanguly Berdymukhammedov

That would require a trans-Caspian pipeline to link Turkmenistan with the pipeline networks in Azerbaijan. Cutler notes that plans for such a pipeline along the Caspian seabed received a welcome boost last month from the EU.

"What has changed, of course, is the European Commission requesting and receiving authority and being empowered to participate actively in the elaboration and implementation of an agreement between Azerbaijan and Turkmenistan for the construction of a trans-Caspian gas pipeline," Cutler says.

Russia is threatening to fight construction of a trans-Caspian pipeline, citing potential environmental damage and the unclear legal status of the Caspian Sea, a matter the Caspian littoral states have been debating for a decade now.

The October 25 Turkish-Azerbaijani agreement clears the way for Caspian gas to reach Europe, but the real work has yet to begin.